U.S. equity markets experienced a notable pullback in afternoon trading on Friday, August 29, 2025, as investors digested fresh inflation data that reignited concerns about the Federal Reserve's policy path. The major indexes retreated from the record highs achieved earlier in the week, with technology stocks leading the broader market lower. The trading session saw a shift in sentiment, moving away from the optimism that had propelled stocks to new peaks, as the implications of persistent price pressures came into sharper focus.

Major Market Indexes Face Headwinds

As the afternoon wore on, all three major U.S. stock indexes were firmly in the red. The S&P 500 (SPX) was down approximately 0.7%, trading around 6,458 points, after closing at a record high on Thursday. Despite today's decline, the benchmark index is still on track to post its fourth consecutive month of gains for August, up roughly 1.8% for the month. The tech-heavy Nasdaq Composite (IXIC) saw the steepest decline, falling about 1.1% to roughly 21,460 points, as investors pulled back from high-growth technology names. Meanwhile, the Dow Jones Industrial Average (DJI) slipped approximately 0.4%, shedding around 172 points, also retreating from its own record close yesterday.

The primary catalyst for today's market downturn was the release of July's Personal Consumption Expenditures (PCE) data, the Federal Reserve's preferred inflation gauge. The report indicated that core inflation, which excludes volatile food and energy prices, rose 0.3% month-over-month and 2.9% year-over-year. This annual pace marks the highest since February and remains notably above the Fed's 2% target. Headline PCE inflation came in at 2.6% year-over-year, unchanged from June and in line with economists' expectations. While the data met forecasts, the elevated figures reinforced worries that inflation remains a stubborn challenge, potentially complicating the Fed's future interest rate decisions.

Sector Performance: Tech Takes a Hit, Healthcare Shows Resilience

The afternoon trading session highlighted a clear divergence in sector performance. The technology sector, which has been a significant driver of market gains this year, was the primary drag on the indexes. Major tech players experienced considerable selling pressure. Conversely, defensive sectors like healthcare showed relative strength, helping to offset some of the broader market losses. Consumer Discretionary also saw declines, while Energy and Financials managed to hold up better, with some even posting modest gains.

Key Company News and Stock Movements

Several prominent companies made headlines with significant stock price movements and corporate announcements:

  • Nvidia (NVDA) was a major decliner, falling approximately 3.4% in afternoon trading. The chipmaker's stock, a bellwether for the AI boom, contributed significantly to the Nasdaq's underperformance, despite ongoing bullish forecasts from analysts citing strong AI growth potential and demand for its chips.
  • Dell Technologies (DELL) slid 7.9%, marking the biggest decline among S&P 500 stocks. This came a day after the company reported second-quarter revenue that exceeded analysts' expectations but also noted margin pressures and weakness in PC revenue.
  • Other tech giants like Broadcom (AVGO) and Oracle (ORCL) also saw significant drops, down 4.5% and 6.6% respectively.
  • On the upside, Affirm Holdings (AFRM) surged 13.3% after swinging to a quarterly profit with better-than-estimated results and reporting surging gross merchandise volume.
  • Ambarella (AMBA) soared 15.5% after providing fiscal 2026 revenue guidance that exceeded consensus estimates.
  • Software company Autodesk (ADSK) climbed 10% after beating second-quarter earnings per share estimates and issuing bullish guidance.
  • Cybersecurity firm SentinelOne (S) added 4.5% following a strong earnings beat and a raised revenue forecast for the fiscal year.
  • Chinese e-commerce giant Alibaba (BABA) rose 4.4% in early trading after its earnings beat expectations, further boosted by reports of the company developing a new, more versatile AI chip.
  • Ulta Beauty (ULTA) jumped 3.6% after raising its full-year earnings and revenue expectations.

Upcoming Market Events and Economic Outlook

Looking ahead, the elevated inflation readings from today's PCE report will undoubtedly be a key focus for the Federal Reserve. Markets are still largely pricing in a high probability (around 87-89%) of a quarter-point rate cut at the upcoming FOMC meeting in September. However, the persistent inflation figures could temper the Fed's dovish stance, leading to increased volatility in the weeks to come. Fed Chair Jerome Powell had signaled last week that economic conditions might warrant a rate cut, but the latest data presents a more complex picture.

Investors should also note that U.S. markets will be closed on Monday, September 1, in observance of the Labor Day holiday. This typically leads to thinner trading volumes and potentially heightened volatility in the sessions immediately preceding the long weekend. Beyond the holiday, market participants will be closely watching for further economic data, including upcoming jobs reports and any additional commentary from Fed officials, to gauge the central bank's next moves.

Today's trading session served as a reminder that despite recent bullish runs, inflation remains a significant factor influencing market direction, especially as the Federal Reserve navigates its path forward on monetary policy.